Zappos Case Study

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Transcript of Zappos Case Study

Zappos Case StudyKenneth Chan, Ulrich Aaby, & Steven Ng

OverviewProblemsWhat if we do nothing? State of the firmAccept Amazon's MergerCapitalize on expanding infrastructure and working alongside Amazon to expand marketConclusionZappos in 2009Valued at $807 Million by Amazon Inc.Largest online shoe store since 2000Just became a $1 billion retailerCompetitive AdvantageIndustry & target marketUpper middle income online shoppers Time constrained with a liking for variety$37 billion market in 2000 for US footwearOnline footwear - $1b in 2002, $2.9b in 2006, $5.3b in 2010Threat of competition from mega-retailers Amazon (Endless), Gap (Piperlime)Business modelThree C'sCustomer Service (delivery, returns, call center)Company Culture (service quality, happy team members)Clothing (Large selection, variety for all customersResults in loyal customers (75% of sales are repeat buyers)Continuing GrowthNeed to reduce capital expenditures & debtIncrease cash flowNeed to fund full inventoryProPotential independent growthMaintian company/brand reputationFull control of company operationsConCompete with big playersLack of investment capitalNo growth in cash flow or reduction in debtProConsistent with current business model Large potential growth areaMaintain customer integrity- More loyal, repeat customersConLack of funds - Lack of variety in clothing could undermine brandAdaptation/expanding into new market has learning curve, requires investment Compete with Amazon's infrastructureProConPressure to perform even more profitablyPotential loss of company brand an reputationLoss of potential independent growthWhyCapitalize on growing market more efficientlyCapture full potential of possible salesMore likely upside in profitabilityEven better infrastructure for operationsEasier access to capitalHowUtilize Amazon's scaleUse their R&D resources for more accurate targetingSynchronize operations to streamline customer experienceOutcomeOpportunities will come for new marketsPotential growth in new marketsGain additional competitive advantagesIncreased Market ShareBased on Jim Harvey's speech structures CompetitionOnline competitors (piperlime, endless, amazon)Physical storesHow to gain more customers moving to online shopping

Company structure and customer service reputationStreamlined fulfillment operations in warehousesDeep product portfolio,Zappos carousel system held over 1.5 million items, was largest horizontal merchandise carouselGoalFocus on growing company and clothingLarger database of customersCustomer network effectIncrease cash flow for operations and expansionMore R&D resourcesFund new inventories for expansionOriginsFormed in 1999One of first online shoe storesMajor challenge: competing with physical stores"We are a service company that happens to sell shoes. And clothing. And handbags. And accessories. And eventually anything and everything."Grow over $1 billion in sales by 2010, which they achievedAmazon's offer?